There are no doubt a fair number of the proverbial rotten apples in the leviathan state of Uttar Pradesh, and like men there are some more rotten than others. The most recent one to be detected is the state's Co-operative Department.

Last fortnight, sleuths of the department's Special Investigation Branch (SIB) caught over a dozen senior officials of the various co-operative units for alleged embezzlement of public money.

Among the accused were Anwar Hussain, secretary, and Mehai Reza, chairman of the Sadhan Sahkari Samiti of Lorapur - who have been charged with embezzlement of Rs 7,55,645 drawn from the local branch of the co-operative bank. The money - ostensibly taken as loan for distribution among poor villagers - was allegedly drawn on fictitious names.

"This is not the only example", says a senior police official in Lucknow, "in which a huge amount of money has been fraudulently withdrawn from the various branches of the State Co-operative Bank and the Provincial Co-operative Federation (PCF) - both of which account for the distribution of over Rs 400 crore worth of loans in the state annually.

The SIB alone has so far investigated 4,538 cases involving a staggering amount of over Rs 12 crore during the last five years alone. It had arrested 2,772 persons since 1971 for defrauding the banks and it has been able to prosecute and convict 406 persons.

Some of the more significant cases of alleged fraud and malpractice are:

Ram Abhilabh Tripathi, chief, District Co-operative Bank, Basti, and Bhagwati Prashad Yadav, the bank's chief accountant and six others have been charged with fraud for withdrawing Rs 9,57,182 from the bank.

Maharaja Singh, co-operative supervisor of Mathura branch of PCF has been nabbed for defalcation of government money to the tune of Rs 4,25,600.

Rajju Thakur and Shyamlal of Manikpur village in Banda district are facing criminal proceedings for the misappropriation of Rs 16,92,000 of the Land Development Bank, Banda.

R.K. Sharma, branch manager of the District Co-operative Bank, Kirtipur in Bijnor district and five others were arrested for allegedly withdrawing Rs 11,86,910 from the bank in fictitious names. According to the FIR lodged with the police, a false account was opened by the accused in the name of a non-existent R.K. Aggarwal. Loans were sanctioned in his name and cheques were withdrawn.

Kalinder Singh, ex-chairman of a cooperative society in Varanasi is facing trial for withdrawing Rs 1,17,660 from the District Co-operative Bank of Varanasi for distribution of loans to fictitious peasants.

Shyam Prakash, manager of Barabanki District Co-operative Bank, has been charge-sheeted along with four others for embezzlement of Rs 1,30,000. The amount was shown as deposits in the bank's accounts without the amount being actually deposited.

Ashok Kumar, a cashier of a branch in Barabanki district, is facing proceedings for alleged misappropriation of an amount of Rs 2,20,000.

Ram Kamal Mishra, a former secretary of the PCF, Sohina in Basti district has been charged with swindling Rs 3,64,020.18 worth of funds.

Interestingly, the modus operandi for defrauding public financial institutions is similar in all the cases investigated so far by the police officials. Falsification of records, forgery of documents, issuing of loans to non-existent parties and fake purchases of instruments have been the normal tricks adopted by those arrested or charge-sheeted during the last few years. But the cases unearthed by the investigative agencies are only the tip of an iceberg.

All the major units like the state's Co-operative Bank, the PCF, and the Consumer's Co-operative Union have lost over Rs 40 crore during the last five years because of the non-recovery of loans. Since all the cooperative agencies are controlled by politicians right from the district level societies to the top. any penal action initiated by the police is sabotaged at every level.

Evidence: Over 500 cases involving Rs 20 crore were pending last year for want of proper records. B.N. Sharma, superintendent of SIB, complained that "non-availability of records was the major factor hindering the prosecution of the accused." In a case involving the embezzlement of Rs 20 lakh, the police threatened officials of a bank with arrest in case the records were not made available.

The result was quick and dramatic: the papers which were missing since 1972 were promptly made available to the police. The basic objective behind the mysterious disappearance of records is to prolong the investigation so that the investigating officers are transferred to other departments. For example, during the last nine months, half of the 118-member strong SIB, including an SP, were transferred leaving behind 800 uncompleted cases.

During the Janata-Lok Dal regime, the SIB used to receive a new officer every second month. Says a senior official of the Co-operative Department sarcastically: "Since the co-operative movement has become the major source of political patronage, the ruling parties always try to shield the criminals because they are their vote banks in the rural areas."

Since the prospects of being caught and prosecuted are slim - in spite of the chief minister's drive against corruption - corrupt officials have devised novel means of denuding the banks. Instead of giving cash loans and assistance to farmers and artisans, the emphasis now is on buying raw materials and various other inputs on behalf of them.

Various co-operative bodies involved in the rural areas have distributed agricultural implements and other raw materials like fertilisers and seeds worth over Rs 25 crore last year. The state's Co-operative Bank sanctioned loans of Rs 4 crore for the purchase of animals alone. And according to intelligence reports, at least half the amount was invested elsewhere while over 25 per cent of the purchase was sold in the open market.

Since the actual audit of the accounts and verification of the records takes place after two to three years, the officials usually get away with the pet explanation that the items have either perished or been damaged.

A senior official of the PCF says: "There is some pilferage in the stocks because we don't have any inventory control. Moreover, these co-operative bodies are managed by the members themselves. Official interference is at a minimum and action is taken only when a complaint is filed with us."

Pilferage: Another major source for pilferage of co-operative funds is the deliberate delay in the recovery of loans from the people. Although over 50,000 people are beneficiaries of the loans every year, the recovery of mid-term and short-term loans hardly exceeds 50 per cent for the state as a whole.

Since quite a large number of accounts are fake, officials have found it extremely difficult to inflate the recovery figures. The cash recovery of loan to demand was as low as 5.39 per cent in Banda district, 12.61 in Mirzapur, 11.3 in Gonda and 17.35 in Kanpur .

Surprisingly, while the recovery rate has nosedived, the utilisation of loans sanctioned by the Reserve Bank of India has been rising constantly. Actual utilisation was over 95 per cent in 25 of the 55 districts. Of the Rs 153 crore sanctioned by the state's Co-operative Bank, Rs 130 crore was distributed as loans during 1979-80. And quite understandably, the amount involved in questionable deals has gone up.

The number of people arrested for various financial crimes has gone up and audit reports have of late been indicting banks and other financial bodies for the erratic recovery of loans. Politicians have also started exerting pressure where necessary for writing off the loans.

Encouraged by the example of neighbouring Madhya Pradesh, where all the loans drawn from the co-operative banks were written off through an ordinance last year, an attempt was made by some politicians to repeat the scenario in Uttar Pradesh too. However, the move backfired because of the Reserve Bank of India's refusal to accept such demands.

The state Government and the concerned officials deny any lethargy on their part in taking timely action against the accused. Says Professor Vasudev Singh, minister for co-operatives: "I will not yield to any pressure. Any individual, however big he may be, will face criminal proceedings if caught."

Singh claims that he has given complete freedom to the SIB to deal with fraud cases irrespective of the consequences. Even the chief minister is determined to weed out the malaise which has infected the Co-operative Department.

Says an aide of the chief minister looking after the Vigilance Department: "The co-operative movement was designed for the uplift of the poor villagers. While they remain where they were a few rich landlords have gained sinfully at the cost of the small savings of the poor farmers."

Corruption always pays but 'co-operative' corruption is obviously more lucrative with the chances of being caught minimal.

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